JPMorgan's Whale of a Trading Loss Tale

Meanwhile, the steady stream of hawkish-flavored statements coming from the Fed (if not yet Mr. Bernanke himself) continues to flow and it is perhaps quietly re-shaping investor attitudes. Think easy “easy money” is the new normal? Think it is here to stay and that the Fed is powerless to alter course? Think again. On Wednesday, NY Fed President Dudley said that the US central bank “will bring quantitative easing to a halt the moment it becomes inconsistent with the Fed’s dual mandate objectives.” Dual as in: employment and inflation targets.

Moreover, Minneapolis Fed President Narayana Kocherlakota yesterday asserted that US unemployment levels may not have a whole lot of room to go lower (read: we are near full employment and the inflation risk posed by zero rates is not worth the pursuit of the last percentage or two in joblessness levels; not if there has been a permanent erosion in the labor force which is now likely here to stay, such as has been the case in Sweden, for example). Mr. Kocherlakota said that “If the [FOMC} were to agree with my prognosis that we should be initiating exit in six to nine months, you would want to change the language of that [current Fed policy] statement even sooner.”

More market news on tap – this time from China. Again. First, the temperature reading on the country’s inflation thermometer showed a rate of 3.4% in April. Yes, that figure is two-tenths of a percent beneath the March number but it also came in above the government’s target. Among the principal culprits were food prices (which albeit lower than March as well, still rose at a 7% pace). On another front, the country revealed trade data that was anything but encouraging. A dip in demand caused annualized export growth levels to slide to 4.9% last month as against expectations of around 8.5% by economists.

April was not kind to the Chinese economy. Output, retail sales, consumer prices, all slipped. Industrial output was actually the slowest in three years and fixed asset investment growth came it at the lowest reading in nearly ten years. New lending activity was indicated at significantly below the expectations of the majority of market analysts. One metric that is normally quite a good barometer of what is happening in the economy, power output growth,…did not; it eked out a less-than-one-percent gain.

On the heels of all that type of news, China Mining.org reports this morning that Chinese gold demand may actually stagnate this year not only because of sliding prices but also in the wake of the country’s slowing economic growth. The country’s largest jewelry fabricator, Lao Feng Xiang Co., cast doubts on recent World Gold Council estimates that China might be able to surpass India as the world’s largest gold consumer.

As things stand right now, despite some headlines we have been offered of late, China has experienced its worst gold jewelry industry conditions since the financial upheaval of 2008. The firm’s VP noted, “The expectations that gold prices will always rise and that gold’s value can only appreciate seems to have faded.” He also reminded folks that – after having been in business for 70 years: “We’ve seen cycles.” Well, at least he can.

Speaking of cycles and such, it might interest you to learn that (among other similar events) the end of the world as we know it has been…rescheduled. An earlier version of the by-now-famous Mayan calendar has been located in Guatemala and the conclusion is that we all have ample time left before we need to worry about Armageddon. Perhaps as much as 6,700 years, give or take…in other words, quite enough of an opportunity to get our lives in order and figure out our priorities. That includes the ones related to our money and what to do with it.